NZ Super model for light rail just the beginning

A modern tram in Melbourne, which shares roads with cars. Photo by Lynn Grieveson.

The Government could roll out public private partnerships to fund infrastructure projects across Auckland and Wellington, Transport Minister Phil Twyford and Finance Minister Grant Robertson said today after the surprise launch of a plan for light rail lines in Auckland that could be funded by a New Zealand Superannuation Fund-led consortium.

The Fund made an unsolicited bid with a consortium that includes a Canadian pension fund to build, own and run light rail lines from Auckland city centre to the airport and from the city to North West Auckland. This has forced the Government to open up a tender process that could last six to eight months.

Twyford said the projects could cost $8 billion to build and take six or seven years to complete once started. If successful, the Super Fund-led bid would be a 'public private partnership' (PPP) where the 'private partner' was effectively a publicly-owned body. It uses the same model as the previous government used to sell 49 percent of Kiwibank.

Twyford and Robertson said the model could be used for light rail and other transport projects in Auckland, Wellington and Christchurch. However, the PPP model does pose political risks for the Government, given it opens up the potential for foreign ownership of publicly used assets.

Prime Minister Jacinda Ardern also refused to say whether she had any objection to transport infrastructure falling into foreign ownership, which has opened the door for foreign companies bidding for key transport projects. NZTA later confirmed that parties from both New Zealand and overseas would be invited to register interest.

Ardern’s comments also leave open the possibility of the NZ Super fund selling the light rail lines to a foreign buyer in the future.

The New Zealand Transport Agency would run the process to explore a range of possible procurement, financing and project delivery options.

Twyford told reporters the offer from the Super Fund suggested that it would both operate and own it in perpetuity and it would not revert back to public ownership after a specified time.

Twyford also hinted that a guaranteed income would be part of an agreement, although he declined to comment on specifics.

“You would expect an arrangement like this any investor would want a revenue stream,” Twyford said.

He expected value capture uplift rates to be used to help generate revenue for the winning bidder. Value capture allows the council to generate revenue from the increase in property values from important infrastructure built nearby.

Twyford would also not say how much of the $1.8 billion the Government had set aside for Auckland light rail would be spent on these two lines projects.

The Super Fund told Newsroom that it approached the Government last month with an unsolicited offer to develop the project alongside CDPQ Infra, a wholly owned subsidiary of Caisse de depot et placement du Quebec. The Super Fund has not worked with CDPQ before, but said CDPQ had experience in infrastructure development, having built and operated Montreal’s 67-km light rail network.

The Super Fund confirmed to Newsroom that it would be reviewing the entire project to determine the most commercially feasible option.

“The options that have been presented to date may not be those that are decided upon," it said.

Controversial plan

The light rail option to the airport has faced criticism, with some calling for money to be spent on improving busways or investing in improved heavy rail.

Light rail is like a tramway, but runs on its own dedicated right-of-way. This means it’s not affected by traffic speeds.

A 2011 multi-agency study recommended investment in a heavy rail loop, including a new 10 kilometre stretch from Onehunga to the airport. The study described that as the "most economically efficient” solution.

This was championed by Auckland Councillor Mike Lee - himself a former director of Auckland Transport - in the New Zealand Herald last month.

But other reports have recommended the light-rail option, arguing it would open up more of the city.

A report from 2016 was in favour of light rail, concluding it to be the better option ahead of two heavy rail options: heavy rail direct to the airport, and a ‘hybrid’ option which would upgrade the connection between the city to Onehunga with a connecting bus service to the airport.

The report concluded that light rail provided the most benefit, adding five stations at “major employment nodes” compared with two stations at one employment node for heavy rail and five for the hybrid option.

Both light rail and full heavy rail are faster than the current bus time; the hybrid option was estimated to be five minutes slower, taking transfer time into account.

Good for Mangere too

Light rail was also considered the best option for improving connectivity in Mangere.

Light rail fared slightly worse when considering ‘constructibility’. The report found it would require three years of “tracks, power, major bridge construction” as well as “large off-line sections”.

Full heavy rail would require three years of significant works, including tunnelling in a “difficult environment”, while the hybrid option was the most straightforward, taking just two years to build “straightforward” infrastructure.

The construction cost of the plans varied widely. Light rail and the hybrid model were the cheapest, costing $1.2 billion and $1.1 billion respectively, although this is probably at the low end of the spectrum. The cost for heavy rail was estimated to be $3.1 billion. Light rail was estimated to have the highest maintenance costs.

The current light rail option promises two-carriage vehicles carrying up to 420 people. This compares favourably to the 180 double-decker bus passengers carried by a comparable two buses. Trams will arrive every 5-10 minutes.

The trams will also have ‘signal priority’ allowing them to pass through traffic more quickly, although this will presumably cause significant traffic disruption.

A representative for NZTA said that detailed costs and the level of disruption and construction times would be laid out in a detailed business case to be released once funding and priorities are confirmed.

Auckland Mayor Phil Goff welcomed the announcement, saying it could accelerate the building of a rapid transit network by a decade or two.

“It’s billions more than we or the Government could have afforded to put in using a traditional funding mechanism,” Goff said.

“I don’t have an ideological view about PPPs," he said, pointing to Auckland's population growth of 45,000 people per year.

Goff said he preferred to do whatever was necessary to ease congestion sooner rather than later, even if that meant using a PPP.

"If the choice is later and funded in a traditional way, it might be a decade or two decades out."

"We don’t need it in two decades. We need it now when we’re facing gridlock and we need new forms of rapid transit that will reach parts of the city not reached by the heavy rail network."